Australian dollar edges higher ahead of RBA's Glenn Stevens speech

The Australian dollar edged higher on Tuesday after the Reserve Bank of Australia's latest minutes didn't up the ante in its rhetoric on the currency's strength.

The Aussie was buying US87.2¢ in late local trade, recovering from an overnight fall below US87¢ in the wake of steeper declines in the euro, after the European Central Bank indicated it would buy government bonds if low inflation continued.

Around midday the dollar hit the day's high of US87.27¢, on the back of the release of the RBA minutes of its November meeting, in which the bank reiterated that despite recent declines against the US dollar, the Australian dollar still remained high.

"Despite the recent depreciation of the exchange rate, the Australian dollar remained above most estimates of its fundamental value, particularly given the further declines in key commodity prices over the course of the year to date," the RBA said, repeating what it had noted in the statement following this month's rates decision.

"As a result, the exchange rate was offering less assistance than would normally be expected in achieving balanced growth in the economy."

The Reserve Bank also noted the dollar's strengthening against the yen after the Bank of Japan last month announced a further easing in monetary policy and the Japanese government's Pension Investment Fund announced it was cutting its holding of domestic bonds in favour of equities and foreign bonds.

"Such flows could hold the Australian dollar at a higher level than economic fundamentals would imply," the Reserve Bank said.

On Monday the dollar briefly spiked to a 19-month high of ¥102.4, following surprise news of a contraction in Japan's gross domestic product in the September quarter. On Tuesday afternoon the Australian dollar was trading at ¥101.57.

OzForex manager of corporate clients Michael Judge said most of the yen's weakness has been factored into the market.

"The Yen across the greenback alone has lost 6 per cent in the past month. A lot of weakness has already been priced in," he said. "If you continue to stretch it, it will need to snap back and reverse itself. We've already seen the initial knee jerk reaction."